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Wisconsin's Gas Law Gets Another Chance

An appeals court will rule on the law, which supporters argue keeps smaller gas stations in business, preventing big rivals from driving up gas prices.

August 23, 2009, 08:00 pm

MADISON, Wis. -- Wisconsin's controversial minimum markup law for gasoline isn't dead yet, according to an Associated Press report. The 7th U.S. Circuit Court of Appeals said it would allow a business group to appeal a February ruling that struck down the law, which critics say needlessly drives up the price of gas.

Writing on behalf of the three-judge panel, Judge Richard Posner sympathized with mom-and-pop gas stations, which say the law has protected them from the possibility of larger rivals undercutting their prices. Posner was critical of Wisconsin Attorney General J.B. Van Hollen's decision to not appeal the ruling on his own.

The Wisconsin Petroleum Marketers & Convenience Store Association has the standing to appeal in the attorney general's place, the judge wrote, because the hundreds of businesses it represents would be directly hurt without the law. "They would lose much or even all of their business to their larger, more efficient competitors," he wrote.

The gas stations had no indication that "the attorney general was planning to throw the case—until he did so by failing to appeal," Posner added.

U.S. District Judge Rudolph Randa ruled the law was unconstitutional in February, and could not be enforced because it conflicted with federal antitrust law.

Van Hollen announced in March that he would not appeal. He noted the state agency that enforces the law did not request an appeal and said lawmakers, not a federal appeals court, should rewrite the law to address constitutional issues, the report stated.

Van Hollen spokesman Bill Cosh said the office stood by that decision.

The law requires gas stations to tack on 6 percent over what they paid, or 9.18 percent over the average wholesale price of gas, whichever is higher. Violators can face enforcement action by the state or lawsuits from their competitors.

Critics say the law is outdated and hurts motorists every time they fill up. In his ruling, Randa estimated the law cost drivers roughly 30 cents on every gallon bought during the past two years, when gas prices spiked to around $4 per gallon.

Supporters strongly dispute that point, and say it keeps smaller gas stations in business, which prevents bigger rivals from eventually driving up the cost after they undercut prices to take out their competitors.

Posner said the appeals court will rule on whether the law is constitutional after receiving briefs from both sides. He said they should address whether Randa's ruling complies with a 1978 U.S. Supreme Court decision, which upheld a Maryland law requiring oil companies to temporarily cut their prices to gas stations.

Matt Hauser, president of the Wisconsin convenience store group, said he was hopeful the law would survive, as it has through 10 legal challenges since the 1990s.

"The law helps level the playing field for independent retailers," he said. "Given the economy, it's never been more important to keep those retailers vibrant and gainfully employed."